Following Tuesday’s video, here is more from this interview with Michael Hudson on Trump’s economic policies, from tax cuts and trade wars to infrastructure, privatisation, industrial policy, Wall Street versus Main Street and Artificial Intelligence and its effects on unemployment.
Another extract from the iconoclastic Michael Hudson’s J is for Junk Economics (p.109-110), in this occasional series:
“Government: From the Greek root cyber, meaning “to steer,” this social control function historically has been provided by public institutions at least ostensibly for the general welfare. Sovereign states are traditionally defined as having the powers to levy taxes, make and enforce laws, and regulate the economy. These planning functions are now in danger of passing to financial centers as governments become captive of the vested interests. The FIRE (Finance, Insurance and Real Estate) sector and its neoliberal supporters seek to prevent the public from regulating monopoly rent, and also aim to shift the tax burden onto labor and industry.
The recently proposed Trans-Pacific Partnership (TPP) agreement and its European counterpart, the Trans-Atlantic Trade and Investment Partnership (TTIP), would compel governments to relinquish these powers to corporate lawyers and referees appointed by Wall Street, the City of London, Frankfurt and other financial centers. The non-governmental court would oblige governments to pay compensation fines for enacting new taxes or applying environmental protection regulations or penalties. The fines would reflect what companies would have been able to make on rent extraction, pollution of the environment and other behavior usually coming under sovereign government regulations. Making governments buy these rights by fully compensating mineral and other rent-extracting businesses would effectively end the traditional role of the state.”
More on Adam Smith, this time from the pen of Michael Hudson in his excellent heterodox ‘dictionary’ J is for Junk Economics (p.28):
“Adam Smith (1723-1790): Traveling to France and meeting with the Physiocrats, Smith adopted their advocacy of a land tax: “Landlords love to reap where they have not sown, and demand a rent for its (the land’s) natural produce” (Wealth of Nations, Book I, Ch. 6, S.8). Landownership privileges “are founded on the most absurd of all suppositions, the supposition that every successive generation of men has not an equal right to the earth…but that the property of the present generation should be…regulated according to the fancy of those who died…five hundred years ago,” that is, the Norman conquerors (Book III, Ch. 2, S.6). Driving home the point, he adds: “The dearness of house-rent in London arises…above all the dearness of ground-rent, every landlord acting the part of a monopolist” (Ch. 10, S.55). Yet free market economists have tried to appropriate Adam Smith as their mascot, stripping away his critique of ground-rent and monopolies to depict him as a patron saint of deregulation and lower property taxes.
Regarding monopolies, Smith observed that almost every private interest represents its gains as a public benefit, as when CEO Charles Wilson proclaimed that what’s good for General Motors is good for the country. But in reality, Smith noted: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices…though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary” (Book I, Ch. 10, S.82).
Opposing the wars resulting from empire building and colonialism, Smith urged that the American colonies be liberated so as to free Britain from the costs of wars financed by public debts that taxed consumer essentials to carry the interest charges.”
Godley is recognised as having predicted a severe recession in the US some years before it began in 2008, due to the unsustainable build-up in private sector debt, particularly among households.
Minsky is also well known for his ‘financial instability hypothesis’ and its implication that ‘stability is destabilising’ in the financial sector of capitalist economies: periods of stable economic growth can create fragile balance sheets in the private sector, which often lead to stagnation or crisis. Continue reading →
Robert Reich is an influential commentator, professor and author, who served under US Presidents Ford, Carter and Clinton, in the latter case as Labor Secretary. YouTube features plenty of his short, useful videos on economics and politics. Here is one of them. Thanks to Lars P. Syll for drawing my attention to it on his blog.
As an aside, I like Reich’s use of illustrative cartoons!
In Trump’s world, the rich in the US obviously are not rich enough. So he has set out to lower the corporate tax rate to 20 percent and abolish the estate tax. The working and middle classes are, of course, überjoyed …
President Trump’s economic team have release their plans for the federal budget over the next ten years. It is a combination of wildly optimistic economic growth forecasts, vicious cutbacks in public services and environmental measures; and significant cuts in corporate taxes and personal taxes for the rich. But what is exercising mainstream economists are the […]